The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that, in part, enables beneficiaries to appeal any covered insurance claim to request payment in full. Sounds simple, but it’s not. ERISA is a complex set of laws, and one article definitely won’t provide a definitive process to follow. However, we do feel it will be valuable to address ERISA’s basics as a jumping-off point for you. To obtain specific recommendations and guidance for your healthcare organization, feel free to follow up with us at firstname.lastname@example.org.
What does ERISA Govern?
ERISA governs both self-funded and fully insured health plans. A self-funded plan is one that the employer takes on the financial risk of the employees' health care claims payments under the cost-sharing plan terms. With a fully insured health plan, the employer takes on no additional financial risk by paying an agreed-upon amount or premium to the health insurance company. The insurance company then assumes financial responsibility for the cost of the employees’ medical care.
According to the 2018 Department of Labor Report, ERISA is the largest segment of the U.S. health insurance market with approximately 136 million people covered by an ERISA-regulated health plan–with approximately 60% covered by a self-funded ERISA health plan and 40% covered under a fully insured ERISA health plan.
It’s important to note, ERISA doesn’t apply to federal, state, or local government-administered plans such as Workers’ Compensation, Government Employees, Medicare/Medicaid, and Exchange Plans. Additionally, others such as the below do not apply to ERISA.
- School Plans (Under Government or Church)
- Personal Injury Cases
- Church Plans
- Individual Policies
ERISA Employee-Beneficiary Protection
ERISA’s intent is to protect the interest of employee-beneficiaries. As protection, plan administrators are required to provide plan participants and beneficiaries documentation that is easily understandable regarding their rights, benefits, and responsibilities.
Plan participants gain an understanding of the plan’s features and what to expect from the plan via ERISA’s required financial disclosures and reporting obligations. This includes a summary plan description (SPD) including when and how employees become eligible for participation, the contribution source and levels, the length of time required to be entitled to benefits, how to file a claim, how medical necessity is determined, what is non-covered, how to appeal, etc.
In addition to the above, ERISA establishes standards of conduct for plan managers and other fiduciaries to safeguard plan funds and benefits for qualifying participants, even if a company claims bankruptcy. Ultimately, ambiguous plan disputes should be made in the best interest of the beneficiary and result in coverage and payment for services provided.
ERISA vs. State Law
While federal law Constitutionally preempts state laws generally under the Supremacy Clause, ERISA includes one of the most far-reaching explicit preemption clauses you will find. The ERISA preemption clause precludes states from fully regulating these self-funded and fully insured health plans if they “relate to any employee benefit plan." This is where some of the historical confusion applies and why many don’t believe ERISA governs fully insured plans. There are some types of state laws that may survive preemption and those typically are relevant to fully insured plans and are impacted by States’ rights to regulate insurance organizations.
Generally, the Department of Labor is viewed as the primary interpretive source and their opinions go far with the courts. The U.S. Supreme Court also plays a role in the interpretation of federal law, but a minimal number of ERISA cases have been decided by the Court. However, some recent U.S. Supreme Court opinions preempt state law. But many uncertain areas remain as a majority of ERISA cases have been left to the lower courts to decide state health policy issues with limited Supreme Court guidance. The result is many differing court opinions relating to the provision preemptions.
ERISA’s deep-rooted complexity leads to many unanswered questions and uncertainty surrounding the impact of state healthcare initiatives and policies. It is those complexities and unanswered questions that create an opportunity for healthcare providers to leverage ERISA in overturning denied medical claims.
This article just scratches the surface of ERISA, but the main takeaway is clear: ERISA’s inherent complexity combined with the fluid nature of the lower court’s interpretations of the law requires a focused strategy to effectively navigate the impacts of ERISA—both positive and negative.
With over 600 hospital clients across 45 states, Aspirion has the expertise to help your organization identify and act on ERISA opportunities. Please contact us here to discuss ERISA and how we can address your hospital’s complex revenue cycle needs.